RUSSIA WARNS EUROPE

Russia's state-controlled gas company, Gazprom, warned its European customers Friday that it could limit supplies to countries that intend to re-sell the natural gas on to Ukraine.

Along with a military conflict in the east, Ukraine is struggling with a $4.5 billion gas debt to Russia. Gazprom last week cut gas shipments to Ukraine after the talks to settle the debt and negotiate a lower price failed. Supplies to Europe via Ukraine and other pipelines have not been affected, however.

Ukraine has sought to counter the Russian move by trying to negotiate gas supplies from other European countries that buy Russian gas. European Union officials said they were working to set up so-called "reverse flow" shipments back to Ukraine via Slovakia.

Gazprom CEO Alexei Miller said Friday that the company is closely monitoring the situation and may curb supplies "in the foreseeable future" to those nations that would pump the Russian gas to Ukraine through reverse flow, which he described as a "half-fraudulent scheme." He wouldn't name any specific countries.

"Ukraine has no right to use the gas in its pipeline," Miller told reporters.

Asked whether Moscow was willing to resume talks with Ukraine, Miller reiterated the company's stance, saying that the country needs to pay down at least some amount of the debt before the talks could resume.

Ukrainian officials have admitted that the country cannot cuts its dependence on the Russian gas right now but have unveiled plans on how to diversify energy supplies and rationalize their use.

Miller said Gazprom is beginning to store extra amounts of gas in its underground storages in Europe in order to guarantee winter time supplies. He said, however, that this "does not eliminate the risks of transit" through Ukraine.

businessweek.com